Series 3 – The National Commodities Futures Test Hedging Strategies & Commodity Market Fundamentals Flashcards
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A corn farmer who sells corn futures to lock in a sales price is employing a:
Answer: Short hedge
A short hedge involves selling futures to protect against a decline in the value of a commodity the hedger already owns or will produce.
A food manufacturer who buys wheat futures to lock in a purchase price is employing a:
Answer: Long hedge
A long hedge involves buying futures to protect against rising prices for a commodity the hedger plans to purchase in the future.
Basis risk in hedging refers to the risk that:
Answer: The difference between cash and futures prices changes unexpectedly
Basis risk arises because the cash price and futures price may not move in perfect tandem, leaving a residual unhedged exposure.
Which agricultural commodity futures are traded on the Chicago Board of Trade (CBOT)?
Answer: Corn, soybeans, and wheat
The CBOT is the primary US exchange for grain and oilseed futures including corn, soybeans, wheat, and oats.
A spread trade in futures involves:
Answer: Simultaneously buying one contract and selling a related contract
A spread involves holding offsetting long and short positions in related futures contracts to profit from a change in their price difference.
Crude oil and natural gas futures are primarily traded on which US exchange?
Answer: New York Mercantile Exchange (NYMEX)
NYMEX, now part of CME Group, is the primary US marketplace for energy futures including WTI crude oil and Henry Hub natural gas.
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Sources & references
Exam facts on this page (fees, format, dates, passing scores) are checked against these official sources; the date is our last check. Editorial policy
- finra.org — Score release, test dates, test delivery, fees, exam format, passing score · verified Oct 2026
- nfa.futures.org — Eligibility, score validity · verified Oct 2026